In a NYT Op-Ed today, Warren Buffett argued that the rich should pay a certain minimum tax, and he explained to activist Grover Norquist that it's preposterous to think that businessmen would forgo profitable deals merely because the rate of tax on the profits would go up.
But why do people listen to Buffett on taxes?
Basically because he's a rich, successful guy (which is why a lot of people are listened to on a lot of subjects).
To that end, economist and former Romney advisor Greg Mankiw has a short post talking about Buffett as a master of "tax avoidance," wherein he lists four things Buffett does to avoid paying taxes.
- Berkshire never pays a dividend (so the jump in dividend tax hikes don't effect him).
- Berkshire only trades long-term (so short-term cap gains, which are taxed at income tax rates don't effect him).
- He's giving most of his money away to charity.
- His children won't pay income taxes on any assets that are bequeathed to them, so an income tax hike doesn't affect him.
None of these are wrong or illegal or anything. And giving your money away to charity is admirable. So the point isn't that Buffett is doing anything wrong, but that he's advocating policies which will have very little effect on him. So if we're going to listen to him because of who he is, it's not preposterous to note how little of an effect rule changes would have on him.
Other folks, in the past, have charged that Buffett specifically benefits from the tax proposals he backs.
Tim Carney of the Washington Examiner has pointed out:
Buffett regularly lobbies for higher estate taxes. He also has repeatedly bought up family businesses forced to sell because the heirs’ death-tax bill exceeded the business’s liquid assets. He owns life insurance companies that rely on the death tax in order to sell their estate-planning businesses.
All that being said, the arguments against raising taxes marginally on the rich (assuming a deficit reduction deal is warranted) tend to be pretty poor.
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